Optimal martingale measures for defaultable assets

DOI10.1016/J.SPA.2012.04.004MaRDI QIDQ436296zbMATH OpenOpenAlexFDO

Authors Young Lee, Thorsten Rheinländer

Publication date 20 July 2012

Published in Stochastic Processes and their Applications (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1016/j.spa.2012.04.004

zbMATH Keywords

defaultable assetsincomplete marketsmartingale measuresminimal entropy martingale measure

Mathematics Subject Classification ID

Martingales with continuous parameter (60G44) Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Derivative securities (option pricing, hedging, etc.) (91G20)

Review text

The question under consideration is which optimal martingale measure should one choose for a defaultable assets? The authors model a defaultable asset as a solution to a SDE driven by both a Brownian motion and the counting one-jump martingale. They noted that in this case in contrast to the exponential Lévy case the entropy measure is rather more difficult to compute than the linear Esscher measure.

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Cited in

(5)

• Martingale densities for general asset prices
• scientific article; zbMATH DE number 1642331 (Why is no real title available?)
• scientific article; zbMATH DE number 2148411 (Why is no real title available?)
• The entropic measure transform
• The minimal entropy martingale measure for exponential Markov chains

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